Mexico and the US: Distant Neighbors, Again

Jun 19, 2017 (San Diego) After Miguel de la Madrid became President of Mexico in the early 1980s, reforms were enacted to stop the sovereign debt contagion of the 1980s. Those economic reforms were the beginning of a structural change in the Mexican economy that ultimately benefited American companies. These changes in time led to the negotiation and signing of the North American Free Trade Agreement.

Mexico stopped protecting its internal markets from outside influence. She also stopped protecting internal industries, such as leather works and shoe manufacturing from outside competition. If you travel to Mexico you can clearly see the changes in ads, and merchandise available, and even to a point, with diet. McDonald’s, Starbucks and Burger King can be found everywhere in large and small cities alike. Walmart owns very large chains of supermarkets. Some are still branded the way they were before they were acquired, such as Aurrerá. You can also find Walmart and Sam’s Club and Costco.

Imported shoes, from the US and now from China and Vietnam, have displaced the shoe factories in the State of Hidalgo. There is more. Mexico imports a massive amount of corn from the United States and also exports beef and chickens to the US. Smithfield raises pork in the State of Veracruz. Mexican Senator Armando Rios Pitier is ready with legislation that would stop the import of American corn, to be substituted with Argentinian and Brazilian product. This is seen as the beginning of a trade war.

Canadian companies have also expanded into Mexico, and these days Canadian companies own precious metal mines and have other major contacts. Zacatecas is rich in gold and Goldcorp has been blamed for doing damage to aquifers, in an echo of a past in Mexican history when foreign companies did whatever they wanted.

The economy of the three countries is integrated, to the point that pulling them apart will cost the United States 14 million jobs that are directly tied to the Mexican market. The San Diego region is tied to the point that a lot of the production is done in Maquiladoras in Tijuana, but sold in the US, and administered from San Diego.

All this is critical. When the Donald Trump administration decides to pull that trigger, it will create a further slowdown in the San Diego economy, as well as the rest of the border with Mexico. We suspect that the economy is already slowing down, as early indicators from business permits issued point to those being lower.

Local malls and stores along the border are already suffering. Why? Mexicans are staying in Tijuana to buy goods and services, they used to cross the border to buy in the San Ysidro, and other areas of the County. The tour busses that used to come to Fashion Valley, are nowhere to be seen. In short, the pride in Mexico and the distrust of the United States is coming back, like a slow moving tsunami. This is a distrust with a long history that a generation of good relations never quite erased.

This distrust started with the 1848 Mexican-American War, when Mexico lost half of its territory to the United States, including San Diego. However, over the past generation, the emphasis on that defeat in Mexican schools and official life has not been as deep. In 2009, then President Barack Obama, visited the jewel of Mexican archeology, the National Museum of Archeology and history. During that visit, he gave a speech to youth from many of the schools in Mexico. He spoke this way:

(Octavio) Paz once spoke words that capture the spirit of our gathering today—in this place that celebrates your past, but which this morning is filled with you, the young people who will shape Mexico’s future. “Modernity,” Paz said, “is not outside us, but within us. It is today and the most ancient antiquity; it is tomorrow and the beginning of the world; it is a thousand years old and yet newborn.”

These days Mexicans have pledged that they will spend as little as possible in the United States. Tourism is already traveling to Canada, costing the American tourism industry $1.6 billion. The growing resentment also means that Mexico is not just creating deeper relations with China, which are new and strategic in nature. She is also strengthening traditional relations with European powers, such as Germany. She is also looking to deepen relations with Latin American nations, including the BRIC economies. In Mexico, it is a given, that this era of good relations with the United States is pretty much over.

This means that the intelligence and military alliances that were built over the last three decades are also weaker. Cooperation between the US Coast Guard, chiefly and the Mexican Navy in the pursuit of the cartels is probably a thing of the past. This will impact US national security.

However, this is not just Mexico. The United States under the Trump administration is isolating itself from other countries. What Trump is doing is weakening the influence of the US abroad, what experts call soft power. This will be the legacy of the Trump administration, one that will be next to impossible to undue for the next president. We are living though the end of the American empire, and while hard power and projection is still available, it is hardly healthy to lack to the ability to influence international affairs using carrots. When all you have are sticks, that is very dangerous.